The methodology behind characteristics of top performing farms

In this section we highlight how this study has been put together. Full details are available in the main reports.

The approach

Each study per sector has a two pronged approach to identifying the key actions of top performers.

The first is a statistical examination of the Farm Business Survey (FBS) data.

The second approach is to describe two extreme farms per respective sector, that are operating at opposing ends of the financial performance spectrum.

Finally, for each sector study, there is a list of things that a farmer should consider to undertake that would help increase their financial performance.

Defining performance

The definition of ‘performance’ will depend on what the individual is trying to achieve. Measuring it will therefore also vary accordingly. In this study, performance is measured as; sales generated by the farming operation divided by the costs associated with it. This creates a return on turnover ratio:

Turnover generated by the farm/associated costs

Using this method, farms of varying sizes can be compared; it examines how a farmer manages to convert inputs into outputs. It is the return that a farmer has managed to generate as a proportion of their output. This suggests that a farmer with a large estate receiving millions of pounds of sales and making £200,000 is not as successful as a small business with minimal turnover and making £50,000. The table below demonstrates that out of the three examples, whilst the last one is making most profit, its return on turnover is the lowest, and the small farm (1) is generating more profit as a percentage of its turnover.

	Farm 1	Farm 2	Farm 3
Turnover (farming income), £	70,000	450,000	900,000
Costs, £	50,000	400,000	840,000
Profit, £	20,000	50,000	60,000
Return on turnover ratio	1.4	1.125	1.03

The matching approach employed in this study uses the agricultural cost-centre only. This is the costs and revenues solely to do with farming rather than the fuller, more diversified rural business that many farms have become.

Matching process

The Farm Business Survey (FBS) is an annual survey providing information on the physical and economic performance of farm businesses in England.

Here, FBS data is used for farms per respective sector for the five years from 2017/18 to 2021/22.

This project involved matching each farm in the top quartile of the performance distribution with one in the bottom half of the distribution which was similar in terms of geographic location and size for each sector respectively.

Beef and sheep

Farms were matched to be comparable with location, amount of farming taking place (measured by standard labour requirements (SLRs)), farm size (on a log scale), organic status, LFA status and altitude. Farms were included where they were classified as beef and sheep farms in each of the surveyed years and were present in at least 3 of the 5 years (2017-18 to 2021-22); 463 farms met this criterion, so that the top quartile contained 116 farms which were included in the matching process. As a check on whether it was appropriate to combine lowland and uplands farms, interaction terms were checked for the post-matching analysis, to see if the scale of differences between top and bottom performers varied with LFA status. Whilst a small number of interactions were statistically significant, their magnitude was not that great, suggesting that the decision to do a combined analysis was sound. Organic status was included so relative performance of organic versus non-organic herds cannot be compared in this analysis.

There were 113 pairs of farms in the post-matching dataset, 3 were unincluded as they did not have a suitable match.

Cereals and oilseeds

Farms were matched to be comparable with geographic location and size. Farms were included where they were always classified as cereal farms and were present in at least 3 of the 5 years (2017-18 to 2021-22); 286 farms met this criterion, so that the top quartile contained 72 farms which were included in the matching process.

Dairy

Farms were matched to be comparable with location, amount of farming taking place (measured by standard labour requirements), organic status, LFA status and hours of unpaid labour. Organic status was included so relative performance of organic versus non-organic herds cannot be compared in this analysis.

Farms were included where they were classified as dairy farms in each of the surveyed years, and were present in at least 3 of the 5 years (2017-18 to 2021-22); 220 farms met this criterion, so that the top quartile contained 55 farms which were included in the matching process.

Back to Characteristics of top-performing farms 2024

Read the full reports

Read the 2024 Characteristics of top-performing beef and sheep farms in the UK

Read the 2024 Characteristics of top-performing cereal and oilseed farms in the UK

Read the 2024 Characteristics of top-performing dairy farms in the UK

Read the 2018 Characteristics of top-performing farms in the UK